Property Investment In Sydney - A Quick Market Insight

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Property Investment In Sydney - A Quick Market Insight
Property Investment In Sydney - A Quick Market Insight

The mere mention of Sydney brings a smile on the faces of property developers and investors as the Harbour City has become the stronghold of commercial real estate transactions. The capital of New South Wales has become the centre of attraction and all the commercial activity which has made it the financial capital of the country and a leading business hub in the Asia-Pacific region. Its progressive market economy is ranked eleventh in the world for economic opportunity.

Naturally, most of the commercial powerhouses want to be headquartered here or establish a corporate office in the CBD. Although the housing property market has experienced a slump, it has not dampened the confidence of savvy investors. The tightening of credit and restrictions on foreign investment may have slowed things down, but have certainly not put a stop on the transactions which are setting new records. Job growth is on the rise and the national economy is surging ahead which has created a congenial environment for investment.

This is the reason why Commercial property for sale in Australia has not been affected by the changing government policies and federal elections. Sydney, as always, is ruling the roost with the best infrastructure, skyscrapers, waterfront views, highly urbanised lifestyle, skilled migrant population, exciting nightlife, and mouth-watering food and drink scene. Let us take a quick look at the market insight for property investment in the city.

 

Robust Economy Favouring The Jobs Market

The jobs market has never looked better in Sydney as skilled migrants continue to flock to the city. The economy of New South Wales has moved up as the Gross State Product increased by 2.6% in 2017-18, even when the housing market is witnessing a downfall in prices. Many infrastructure-based and non-residential construction projects are moving forward in the city, which are supported by the growth of the economy.

Government is investing in a variety of projects which has further helped in the creation of jobs and taken the employment rate above the national average. With low unemployment, amplified demand for office spaces, low-interest rates, and decent population growth, Sydney is still a highly sought-after marketplace for investors and developers.   

 

Rising Demand And Its Impact

The office vacancy rates in Sydney have hit an all-time low since the year 2000. It is expected to remain the same way until 2020 as the employment levels are going up. Although the new stock is being supplied into the market, it has not hampered the demand. The rental rates are at record levels with the average CBD rental reaching the $1000 per sqm threshold during the second part of 2018.

The A-grade premium commercial office building rentals have leapt to $20,000 per sqm. With China’s Poly offering major stakes in Sydney and Melbourne office projects, the picture looks rosy. The prime properties are the best opportunities as they do not require frequent upgrades and get tenants easily. Additionally, long lease terms make them more lucrative. That is why the absorption of prime spaces is taking place at lightning speed.

For instance, as soon as the Clarence Street project was completed, the space was occupied by renowned businesses such as Pfizer, Arup, Mills Oakley Lawyers, etc. The lease deals are getting the highest demand from the financial and insurance sector followed by professional services. Co-working spaces have also emerged as major drawers and B-grade spaces are also following the lead of A-grade spaces in maintaining the low vacancy rates. With the employment offers growing by the day, the absorption levels will continue to rise through 2020.      

 

Withdrawals And Supply Of Offices

During 2016-17, a lot of stock was withdrawn from the market to be developed into residential spaces. However, the trend changed in 2017-18 when most of the withdrawal was directed at the refurbishment of properties to match the requirements of tenants. The properties being closed down for upliftment and makeover were higher than the ones completed in the past one year which led to negative net supply.

However, the assets in the renovation are away from the market for a temporary phase and will be back in the arena soon. Most of the refurbished spaces are already pre-committed to tenants. Various new projects which are currently being developed will hit the market in the next three years which will increase the CBD stock by up to 3.8%. The new developments include 60 Martin Place, Wynyard Place, and Quay Quarter Tower and are all pre-committed, which will not have much impact on the vacancy rates.

Many investors are also moving towards the suburbs such as Parramatta, Chatswood, Macquarie Park, etc. where the vacancy rates are falling fast. In fact, Parramatta has the lowest vacancy rate in the entire country at present. Many offices are relocating to North Sydney to capitalise on its prominent business activity and growth in population.        

 

Offshore Investment And Transactions

The offshore investors are showing a keen interest in the nation’s commercial real estate which will continue in the coming years. The past year proved to be a big surprise for developers as the Australian office market recorded transactions worth $19.53 billion, which was the highest ever. The current year is expected to experience a 10%-20% lower transaction volume, which is not too bad either considering the jump it experienced last year.

The increased confidence of investors is a result of the IOF portfolio deal and the growing percentage of core assets being available in the market. The offshore capital investment in 2018 accounted for 47% of the total transactions and most of the dollars flowed from Canada followed by USA, China, Japan and Hong Kong. The domestic investors are also joining the race to make sound investments in the CBD, which is viewed as a leading global financial and commercial destination.     

 

Conclusion

As mentioned above commercial property for sale in Australia has been progressing positively and will continue its winning streak in the coming years. If you are interested in investing in the sector, then you must divert your attention towards Sydney which is supported by a variety of economic factors, low unemployment rates and decreasing vacancy rates. 

  

         

Author Info Sophie Barrett

Sophie Barrett is an experienced real estate marketing professional with a specialisation in commercial property market. She has a Masters degree in marketing from the esteemed Melbourne Business School and has several property management certificates to her credit. Her shrewd marketing policies and business acumen have led to the most rewarding property deals in the major capital cities of Melbourne, Sydney and Perth. She is a popular name in the real estate market and has been serving the industry for almost two decades now. CommercialProperty2Sell is proud to partner with her for some astute discussions and advice on the booming sector.  

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